The pound hit a fresh high for 2017 on stronger-than-expected inflation

The pound rose further against the dollar to a fresh high of the year on the stronger-than-expected inflation ahead of BOE policy decision on Thursday.

We will get a flurry of economic pointers today, including U.K. August unemployment rate, EU July industrial production (YoY), U.S. August PPI and weekly oil inventory data from EIA.

The dollar consolidated against a basket of six major rivals in a choppy market below a major H4-period trend resistance on Tuesday (12 September), with the pound catching the eye of investors. According to ONS, the Consumer Prices Index (CPI) 12-month rate was 2.9% in August 2017, higher than the consensus forecast of 2.8%. Meanwhile, the core measure came in at 2.7%, higher than both the previous reading and analysts forecast. In addition, retail sales for August in U.K. increased as well. The sterling extended rallies to a fresh one-year high on the better-than-expected macro data. The renewed hike hopes could continue to lift the pound in the coming days ahead of BOE policy decision on Thursday.

Technical

The dollar index (DXY) reacted off around a major H4-period trend resistance. It will be interesting to watch whether or not the index could break out its short term trading range. Holding below its long term moving averages which flattened further and offered modestly strong resistances, its short term moving averages tended to move towards each other in the short term and will likely turn lower again going forward.

（DXY H4 chart）

As to non-U.S. currencies, the euro rallied above H1-period EMA60 after choppy consolidation. It will likely fluctuate at its long term moving averages on the 4 hour chart if the single currency fails to sustain its rally on the day. The sterling upside momentum waned in New York session after it rose to a new one-year high. Nonetheless, the currency could maintain its uptrend on the increased expectation of rates hike. The Aussie dollar traded above its major support at H4-period EMA60. Given holding above the short-term support, it will be interesting to observe whether or not the commodity currency could resume its rally.

（GBP/USD H4 chart）

Let’s review the price action of precious metals now. The gold rallied to validate its breakouts origin yesterday after briefly breaking below its major H4-period trend support. It will be a game changer if the yellow metal fails to sustain its rallies and turned lower again going forward. Watch the movements in its short term moving averages and long term moving averages on the 4 hour chart.

（Gold H4 chart）

By JasonZou —— Chief Analyst of AvaTrade China

Disclaimer: The views and opinions expressed in this article are those of the authors and for the purpose of reference only, and shall not be relied upon by investors in making any trading decisions.